Early role for FIRB in ASX bid

The Foreign Investment Review Board discussed the proposed merger of ASX Ltd and its Singapore ­counterpart at its board meeting in December, despite the fact the two exchanges had not yet formally sought approval for the deal.

The revelation, which gives a rare glimpse into the workings of the FIRB, comes from documents sought by The Australian Financial Review under freedom of information laws.

It appears to confirm the extent to which FIRB deliberations are driven in some sensitive cases by informal contact between the board and ­applicants.

It is believed it was such ­informal contact that led
ASX
and the Singapore Exchange to amend their merger proposal in the hope of garnering greater political support for the deal.

The proposed merger is running into increasingly large political roadblocks, with The Australian Financial Review reporting yesterday government sources predicting the deal would not get through Parliament.

The deal is unusual in a regulatory sense in that not only must it pass foreign investment approval processes but it requires Parliament to remove legislated limits that prevent any one party owning more than 15 per cent of ASX.

The view from within the government came from someone ­outside the immediate sphere of Treasurer
Wayne Swan
, who must make the initial decision on whether to approve the deal on foreign ­investment grounds – if it has been cleared by the FIRB – before it goes to Parliament.

The government source’s view was couched in terms of the fact the deal was unlikely to be backed by the Coalition, rather than because there was any particular hostility to it from within the government. Nonetheless, with the government facing a daunting agenda of political difficulties, Labor MPs can see no great reason to go out and champion the deal.

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Mr Swan said yesterday he would take his decision based on the evidence before him, not as a result of outside influences; and based on the national interest, not on political considerations.

“The final decision maker here is the Treasurer," he said.

“I will take my decision based on the evidence before me, based not only on the recommendations of the Foreign Investment Review Board, but a thorough consideration of all of these issues in good time.

“I will do all that without any outside influences upon me whatsoever. That’s the responsibility that I have under the law, that’s how I’ll do it, and I’ll announce the decision under our national interest guidelines in good time."

Asked on ABC radio whether the political reality was that, even if he approved the deal, it would in all likelihood be rejected by Parliament, Mr Swan said his decision “will be taken in the national interest and it will have nothing to do with those political considerations whatsoever".

SGX moved on ASX in October in an $8.4 billion bid to create the world’s fifth-biggest stock exchange.

The exchanges filed a formal application to FIRB on March 11, but are battling to overcome political concerns about ASX falling into foreign hands.

Last month, SGX bowed to pressure and agreed to change the terms of its offer to give Australians more seats on the board of a combined exchange.

However, the concession has failed to douse political opposition to the deal, with Nationals leader
Warren Truss
warning of serious reservations and Coalition MP
Malcolm Turnbull
saying the deal would have more chance of winning support in Canberra if it was a “merger of equals" rather than a takeover.

ASX chairman
David Gonski
told the Financial Review the exchange would continue to hold discussions in Canberra while it waited for a decision from the FIRB.

“The application [to the FIRB] is in and we will obviously continue to talk to people and assist them in coming to their decisions, but I don’t have anything to add on the process," he said. “I don’t think we should comment on who we are talking to, but obviously we will be talking widely."

Once it has received a formal application to review a foreign takeover, FIRB has 30 days to make a recommendation. However, sources say it is likely to ask for an extension of a further 90 days.

ASX shares fell almost 2 per cent yesterday to close at $34.18, the ­lowest since the bid was announced as investors reacted to growing political opposition. SGX shares were up more than 3 per cent in late trade.

At yesterday’s share prices, the SGX’s cash and scrip bid for ASX was worth about $42.70 a share, down from $48 when the takeover was announced in October.